Death of the PC Companies

Well, for sure, when I started out my career, I never thought I’d be writing this.

About 18 years ago, maybe a little more, after compiling a report on industry trends, I informed my company that we needed to change the business direction, because it was clear from the long term technical integration trend report that the phone would take over most of the PC market.

It was obvious that as soon as we got a decent processor, compact memory systems, and graphics processors were shrunk to the point of living inside a phone and playing back movies, with an interface connector small enough to get the movies to a big screen somewhere, we would have a phone that would do it all.

We have that phone almost. If AAPL would ever choose a processor that’s good enough and solve the battery life problem, and maybe with more gas stations (gas station being a display kiosk with a keyboard and charger for your iPhone), we would have a solution to my prediction of the future.

Once we get a good phone, what happens to the PC? We’ve already seen the market swing away from an unwieldy form factor notebook to a tablet which lets the user surf the net, and be a “shopping buddy”. Those are the biggest (non-office) usage models for PCs

The PC has evolved into a professional device that a business user can carry around, and an office device which provides local solutions requiring high-resolution display and compute-intensive applications. As we get more “cloud”, that device will be able to evolve down into the tablet market. There’s 3 technical issues that need solutions before this evolution will be complete:
1. Guaranteed bandwidth wherever you are located
2. Complete and absolute security
3. Guaranteed cloud storage space and processing power.

Also there needs to be a paradigm switch for applications where they anticipate keystrokes or mouse clicks and have those predictive answers ready—right now all apps are built backwards, waiting for the keystroke or mouse click before they take direction).

Once you get those three things, all you need to carry with you is your Good Phone and a keyboard. No more need for a notebook. Once you get those three things, you will only need a very small docking station in your office, kind of like the gas station I already mentioned.

So what does that mean to companies like HP whose infrastructure is set up to handle bass-ackwards apps and clumsy heavy hardware for corporations? I think HP’s demise will be shown to be caused by Carly, the great HP/Compaq integrator. HP reminds me of the Argentinosaurus. Looks like the Cretaceous Extinction is fast approaching them.

HP is beginning to feel the pain. Dell is not far behind. Unless Intel gets its act together, they are absolute toast (most of it caused by my old pal, Craig Barrett).

By contrast, take a look at IBM: They are incredibly smart, moving out of the PC industry completely.

There will still be a small need for the desktop PC. There will always be gamers wanting the ultimate video interface theater-game like they get at the arcade. But that market is shrinking (did you see nVidia’s future sales projections? ICan must have had a crystal ball, for sure). There will always be some application that solves a niche problem that won’t be ported to the cloud. But for those few cases, there will be Thors who will go around, buying motherboards and chassis and P/S, and integrating those for companies, developing corporate-specific hotloads. (The first thing a corporation who buys PCs does is throw-away the on-board hotload).

What happens to the PC companies? They develop servers, and raids, and matrix-memory solutions for cloud installations. Their market shrinks like a $5 sweater.

How do we trade this?

Short Dell. Short HP.
Long memory producers, including IBM
Long Cloud-software producers, like VMW

By the way, you don’t think that was an accident, IBM getting out of the PC and developing the 3-D memory element, do you? (If you’re techno-interested about the 3d memory, you can read this article.)

http://www.sciencedaily.com/releases/2007/04/070412132140.htm

(See I’m learning not to put the period after the link).